Trading news

Central Bankers To Fuel Forex Market

With global oil-producers' once in eight years production-cut accord, coupled with mixed US job figures and Italian referendum, the financial market witnessed slew of volatile moves in last week. However, the US Dollar Index (I.USDX) couldn't enjoy the volatility this time and registered its first weekly loss in previous four as traders remained cautious ahead of next week's Fed meeting and favored to cash out of the greenback which earlier rallied "too far, too fast". On the other hand, the EUR remained sluggish and dropped during Monday when Italy's PM witnessed a defeat on referendum pole which could have favored his wish to rein in the senate's power. Further, the GBP also had to liquidate some of its earlier gains as speculations mounted that not all the UK policymakers favor government's proposal to pay EU for maintaining its entry-gate status. Moreover, the CAD rallied on OPEC decision while AUD and NZD also followed suit but JPY and Gold prices kept declining with fewer safe-haven demand.

Unlike last week, the present week has very few economic details/events that could trigger wild-moves into the global financial markets. However, monetary policy meetings of the ECB, BOC and RBA, coupled with AU GDP, Chinese Inflation, US Factory Orders & Consumer Sentiment, may offer intermediate trading opportunities to investors. Let's quickly analyze them.

No Major Hits For Greenback

US economic calendar bears only monthly readings of ISM Non-Manufacturing PMI, Factory Orders and Prelim UoM Consumer Sentiment during the upcoming week which signals lesser USD moves to take place.

All of the three scheduled updates are expected to provide another push to the greenback's northward trajectory as Monday's ISM Non-Manufacturing PMI is likely being higher than its previous print of 54.8 with 55.3 mark while Tuesday's Factory Orders may flash the highest growth figures since September 2014. Additionally, Prelim UoM Consumer Sentiment, scheduled for Friday, bears the consensus to please greenback traders by re-testing June figures of 94.3 versus its upwardly revised earlier reading of 93.8.

Given the expected strength of scheduled data-points, coupled with prevailing optimism for December rate-hike, the US Dollar is more likely to maintain its up-move unless any drastic negative pops-up.

AU GDP And RBA To Portray AUD Moves

As compared to US, Australian detail/events become more important for Forex traders as quarterly release of AU GDP and RBA meeting is scheduled to take place during the week. Even if the Trump victory seems good news for metal-exporters like Australia, pessimism at the nation's largest trading partner, China, coupled with not so upbeat economics, give rise to expectations of a pullback in AUD prices.

Looking at the Q3 2016 GDP figure, scheduled for Wednesday release, the growth mark is likely testing the lowest print in nearly five-year, when observing the revised figures, with 0.2% number versus 0.5% prior. This may be due to weaker inventory levels and an expected dip in AU companies' performance on US President-elect Donald Trumps' harsh statements against China, its largest consumer.

Other than the GDP, monetary policy meeting of Reserve Bank of Australia (RBA), on Tuesday, also becomes an important event for Aussie traders. Although, the Australian central bank isn't likely to alter its key Cash-rate from 1.5%, the rate statement becomes crucial for investors. Chances are higher that RBA policymakers may deviate from discussing rate-outlook and chose to comment on US election result's impact on their economy, which then seems pivotal to determine near-term AUD moves.

Hence, with expected soft GDP figure and a bit weaker tone of RBA policymakers might trigger AUDUSD downturn towards 0.7310. However, a surprisingly hawkish central-bank tone and upbeat growth figure may enable the pair to challenge 200-day SMA level around 0.7530.

EUR Traders Shouldn't Miss ECB & German Factory Orders

While Italian referendum has already given another shock to the EU, following the Brexit, Tuesday's German Factory Orders and monetary policy meeting by the European Central Bank (ECB), on Thursday, carry much more importance for EUR traders.

The German Factory Orders, up for Tuesday, is likely reversing its previous contraction of -0.6% with +0.6% mark and could give a sigh of relief to the regional currency traders ahead of Thursday's ECB meeting. Monetary policy members of the regional central bank aren't expected to alter the EU Minimum Bid Rate but ECB President, Mario Draghi, just after the rate announcement, may discuss recent setbacks for the regional economy and could also provide his opinion for US election results. Additionally, threats from upcoming elections at Spain and France may also be signaled during his speech and the Bull-favoring central banker may have to take a hit while speaking.

Considering another shock to the EU, in the form of Italian referendum result, dovish comments from the ECB President, which is more likely, can continue dragging the EURUSD towards 1.0430 & 1.0320 supports while 1.0850 continue acting as strong resistance for the pair.

UK Manufacturing Production & Chinese Data-Points For GBP & Commodities

Following upbeat print of UK Services PMI, GBP traders are waiting for Wednesday's UK Manufacturing and Industrial Production figures to forecast near-term moves of the Pound. From the forecasts it appears that both these production figures are likely printing 0.2% growth versus their +0.6% and -0.4% prior. While Manufacturing PMI is likely providing a drag to the GBPUSD towards testing 1.2500 mark, the Industrial Production may help the British Pound in extending its recent advances to surpass 100-day SMA level around 1.2800. Additionally, comments from UK policymakers relating to Article 50 negotiation with EU can also provide noticeable impact on GBP prices.

It's no secret that Donald Trump doesn't like China. He repeatedly uses his public appearances to reveal the same which in-turn threatens China and its related economies, like Australia, New-Zealand and Canada, when the world's second-largest economy is struggling. However, monthly releases of Chinese Trade Balance and Inflation figures, scheduled for release on Thursday and Friday respectively, may offer noticeable moves to commodity desk. While Trade Balance figures are indicating shrinking surplus to 307B versus 325B prior, expected upbeat CPI and PPI, to 2.2% each from 2.1% & 1.2% respective prior, could help avoiding any bear-traps for commodity currencies.

BoC And Trade Balance Could Help Foresee CAD Trend

Even as the OPEC deal dragged USDCAD to more than a month's low, concerns over the non-OPEC oil-producers' capacity to increase output may keep hurting energy prices, which in-turn could hurt Canadian Dollar (CAD). Though, Tuesday's Canadian Trade Balance and monetary policy meeting by the Bank of Canada (BoC), on Wednesday, may offer important insight while predicting near-term CAD moves. Canadian Trade Balance is likely revealing a reduction in deficit to -2.1B from -4.1B prior and the BoC is also expected to maintain its present accommodative monetary-policy intact. Should there be an absence of positive statements from the BoC's rate-statement, coupled with weaker Trade figures, the USDCAD becomes more likely to reverse and target 1.3460 & 1.3580 resistances with 100-day SMA of 1.3185 acting as nearby support..

Cheers and Safe Trading,
Anil Panchal

Monday, 05 Dec, 2016 / 12:11

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